Sensex predicted to hit 82,000 mark in 12 months
International credit rating agency Moody's has released a report, forecasting that the BSE Sensex will reach 82,000 within the next year, marking a 14% increase. The report attributes this projected growth to the policy consistency of Prime Minister Narendra Modi's third term, which is expected to continue until 2029. "The main benefit to the market of the NDA's re-election is policy predictability, which will influence how growth and equity returns pan out in the coming five years," the report stated.
Moody's anticipates further structural reforms
Moody's also anticipates that the Indian government will continue to prioritize macroeconomic stability, particularly by maintaining a vigilant stance on inflation. The report suggests that with the continuity of the government, markets can expect additional structural reforms. "With government continuity now in place, we believe the market can look forward to further structural reforms, giving us more confidence in the earnings cycle," said Moody's.
Revising India's GDP and inflation forecasts
Moody's has revised India's GDP growth forecast to 6.8% for 2024-25, while predicting that headline CPI will slow down to around 4.5% for the year. The agency anticipates improved company performance, with earnings growth expected to remain 500 basis points higher than consensus through 2025-26. The report also suggests that India is tipped to drive a fifth of global growth in the next decade due to various factors.
Highlighting positive structural changes
The report highlighted that policy reforms over the past decade have positively transformed the economy's structure. The Reserve Bank of India (RBI) has also played a role in maintaining macroeconomic stability via flexible inflation targeting, which has reduced inflation volatility and lowered the interest rate gap with the world.
Moody's warns of potential risks
Despite these positive forecasts, Moody's report also warns of potential risks including capacity constraints in bureaucracy, judiciary, education, healthcare, and skills training. Other risks identified in the report are geopolitics, AI's impact on the tech industry, less productivity in the farm sector, climate change, and a lack of adequate factor reforms. The agency also cautioned that a significant global growth slowdown could negatively impact India's growth and funding.
